The Board of Audit and Inspection (BAI) announced on Tuesday that the previous administration had limited electricity and gas rate hikes despite surging energy prices, contributing to a financial crunch for major state utility firms.
The BAI announced the analysis after an audit of 25 public institutions and five central government agencies, prompted by calls for a complete overhaul of state utility firms, including the Korea Electric Power Corp. (KEPCO), which has been grappling with escalating losses.
Beginning in July 2021, the Ministry of Trade, Industry and Energy advised the government to raise electricity and gas rates to address the soaring global energy prices, according to the BAI.
However, the Ministry of Economy and Finance repeatedly recommended postponing rate hikes, citing concerns about the public's financial burden and high inflation stemming from the COVID-19 outbreak.
As a result, electricity rates only slightly increased in the fourth quarter of 2021, while the gas rate hike was postponed. These rates have been gradually rising since the current administration of President Yoon Suk Yeol took office in May of last year.
Last year, KEPCO incurred a record high operating loss of 32.6 trillion won (US$24.2 billion), more than quadruple the figure from the previous year.
The BAI said that at the time, the government chose to delay raising electricity and gas bills in alignment with the finance ministry's advice, despite concerns that the decision would shift the burden to the incoming administration.
The audit also revealed poor financial management practices among major public institutions, which had created overly optimistic medium- and long-term plans, according to the BAI.
Furthermore, the BAI pointed out that aggressive investments in renewable energy projects, including solar panels, by public institutions were a contributing factor to their mounting losses.
The promotion of renewable energy was a key agenda item during the previous Moon Jae-in administration.
The BAI estimated that the total amount of wasted budget and inefficient management due to such investments amounted to around 2 trillion won.
Source: Yonhap News Agency